Stock Story -
Online home goods retailer Wayfair (NYSE: NYSE:W) reported results in line with analysts' expectations in Q4 FY2023, with revenue flat year on year at $3.11 billion. It made a non-GAAP loss of $0.11 per share, improving from its loss of $1.70 per share in the same quarter last year.
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Wayfair (W) Q4 FY2023 Highlights:
- Revenue: $3.11 billion vs analyst estimates of $3.11 billion (small beat)
- EPS (non-GAAP): -$0.11 vs analyst estimates of -$0.15
- Free Cash Flow of $62 million, up 47.6% from the previous quarter
- Gross Margin (GAAP): 30.3%, up from 28.8% in the same quarter last year
- Trailing 12 Months Active Customers: 22.4 million, up 300,000 year on year
- Market Capitalization: $5.75 billion
Online RetailConsumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.
Sales GrowthWayfair's revenue has been declining over the last three years, dropping on average by 3.4% annually. This quarter, Wayfair reported lacklustre 0.4% year-on-year revenue growth, in line with analysts' expectations.
Usage Growth As an online retailer, Wayfair generates revenue growth by expanding its number of buyers and the average order size in dollars.
Wayfair has been struggling to grow its active buyers, a key performance metric for the company. Over the last two years, its buyers have declined 13.9% annually to 22.4 million. This is one of the lowest rates of growth in the consumer internet sector.
Luckily, Wayfair added 300,000 active buyers in Q4, leading to 1.4% year-on-year growth.
Revenue Per BuyerAverage revenue per buyer (ARPB) is a critical metric to track for consumer internet businesses like Wayfair because it measures how much customers spend per order.
Wayfair's ARPB growth has been strong over the last two years, averaging 9.6%. Although its active buyers have shrunk during this time, the company's ability to successfully increase prices demonstrates its platform's enduring value for existing buyers. This quarter, ARPB declined 0.9% year on year to $139.02 per buyer.
Key Takeaways from Wayfair's Q4 Results We struggled to find many strong positives in these results. Its revenue growth regrettably slowed as management called out a difficult macro environment. The company is exercising efficiency, however, as its free cash flow of $62 million beat analysts' estimates of break-even cash profitability. Overall, the results could have been better. The stock is up 3.6% after reporting and currently trades at $50.5 per share.
